Language Channels
In July, 1997, a consortium of investors announced a $3.5 million investment in StarMedia Network, Inc. (www.starmedia.com) StarMedia Network's portfolio of "channels" offers communications, retail services, information and entertainment programming of interest to a broad-based, online audience in Spanish and Portuguese. In a July 28, 1997 press release, Flatiron Partners' managing partner Fred Wilson was quoted as saying:

``These early achievements send two clear signals. First, the Internet community model that has proven so powerful in the U.S. is even more compelling in a region where, historically, communications have been hampered by lack of infrastructure and political boundaries. Second, as in the U.S., first movers have a clear advantage as loyalty is heavily correlated with those brands used during users' early experiences navigating online.''

Auto Sales & Lease Financing
GE Capital's Auto Financial Services and Auto-By-Tel (www.autobytel.com) announced in a August 13, 1997 press release that they have combined to bring online car shoppers low-cost automobile leasing for both new and used cars. At the close of 1997, Auto-By-Tel expects it will have processed more than one million Purchase Requests for new and used cars. "By adding GE Capital leasing services to the Auto-By-Tel website, GE is taking its relationship and commitment to this cutting-edge, Internet-based company one step further,'' said Sandy Derickson, President, GE Capital Auto Financial Services, according to the press release. The press release also noted the use of security precautions at the site: "To ensure the security of its customer's personal financial information, Auto-By-Tel utilizes a double firewall and state-of-the-art encryption technology."

"Since February 1995, when ABT started, the monthly flow of purchase requests has risen from 5,000 to more than 60,000, which means ABT has become a giant funnel for market share. It sucks in a desirable demographic--affluent, educated, motivated buyers--and makes its money not by taking commissions on the cars bought by ABT users but by charging for access to those users. Who wants access? First, car dealers, who pay monthly and annual fees in return for exclusive ABT franchise rights in their area. (There are 2,000 such dealers so far.) And second, providers of auto-related financial services looking to ride the deal flow. ABT has forged strategic partnerships with Chase Manhattan Bank, one of the largest auto lenders in the United States; American International Group (AIG), the multinational insurer; and General Electric Auto Financial Services, a major force in auto leasing. Some of these players invested $15 million in ABT last August. In January they ponied up another $9 million."

"ABT changes the way that companies that do business with it operate. It drives manufacturers to streamline distribution by guiding volume away from marginal, expensive-to-serve dealerships, where customer loyalty has languished. It slashes dealers' costs, notably in advertising and labor, which together account for 63% of the typical dealer's operating expenses. It steers the customer--and the industry--toward a low, "no haggle" price, free from the dread and intimidation that have typically poisoned the car-buying experience."

"At the same time, the ABT model will inflict change on those who try to steer clear of its new approach. "The losers will be traditional finance and insurance companies, including auto-company finance subsidiaries," says Ericksen. "Their customers are no longer captive. With a click of the mouse, the car buyer can pick and choose among an array of financing alternatives."